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TheWalrusandtheNasriator

Listed below are comments made by TheWalrusandtheNasriator between Friday, 27th March 2009 and Monday, 16th November 2009.

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Shaun of the Dread 6:32pm on 16 Nov 2009 I imagine I will get a lot of stick for saying this but... I thought our team would have put in a much better performance with Heskey on the pitch. With Heskey offering an outlet to hold the ball up it would have let Rooney play off the front man and spread the play, it would have given Milner someone to pass to, it would have allowed England to hold on to possession instead of aimlessly punting the ball over the top, and it would have let England play for territory.

Without Heskey our play had no front man to work off, Rooney dropped to receive the ball and Bent went long to look for the ball over the top. It is exactly at this lesser England level that I expect we would have seen Heskey's true value - he provides a fixed supporting striker role allowing wingers and forwards to make runs off and midfielders to be brought into play from. Brazil would have struggled with Heskey's presence imo, even if he would have provided his usual level of goal threat = zero.
More on Osborne's plans 00:43am on 09 Oct 2009 136

Hold on, I'm not suggesting we default on our loans. I'm not suggesting we don't meet the obligations of the loans. We have to pay that money back. What I mean is just as if we had taken out a low rate mortgage and we have an opportunity to max out our credit cards or cut our investments to zero to pay it back early doesn't mean we should. The rate we pay for our govt debt is low. We shouldn't repay the loan early by cutting our public sector investment which will earn a much greater return. That's just stupid.

Debt is not always a bad thing. There are many people who are making out like owing money spells financial ruin for Britain. It doesn't. We should pay back the minimum amount required for the time being. It isn't our creditors who are asking for the money back anyway. It's the financial "experts" who say we have a large debt and "quick we need to pay it before people lose all faith in the UK!" This is just not true. Debt is not some kind of pariah watchword in international financial markets. The US runs a huge structural deficit and the markets have never yet called time on it even with such patently idiotic spending plans as the ones instigated by the Bush presidency.

I agree that there was a lot of wealth in the empire. But we couldn't use it. We actually went to Congress to beg for a loan following the end of the war. The reason was we couldn't afford to continue financing our empire operations. Empire meant a large military and naval force. It meant trying to maintain the world's reserve currency. Congress dictated harsh terms to us in return for a loan - no more empire, no more reserve currency status for sterling, give British technology to the US. We lost the empire because we had to, because it cost too much. The empire was a financial burden by the end, and we couldn't afford it after the war because then we truly were on the verge of bankruptcy. Unlike now. Which is my point really. The austerity period after the war, the rationing the wage negotiations, trying to maintain a strong pound - all these strategies were employed by the postwar govt and they failed and Britain's growth lagged that of the rest of the Western world, even in an unprecedented golden age for growth under the fixed exchange rate system.

Right now the pound is weak and it is helping to allow some recovery in our battered manufacturing sector. Right now public sector spending is helping to keep people in work and keep spending at a reasonable level. And as the markets recover new investment will start to reemploy all the spare capacity left over from the recent recession. But if we act to correct public finances we will shoot ourselves in the foot - we will weaken domestic demand at the same time as weakening foreign demand by strengthening the pound. We will push our own consumers towards shopping abroad and limit demand for exports. We need to learn our lesson and accept public finances will be worse for a while, and concentrate on getting things moving again before tackling the issue of structural deficits, because tackling them now will only cause us more pain. Let us wait for the threat of inflation and use our deficit reduction scheme to reduce demand when it is too strong, not reduce it now when it is already weak. It's basic Keynesian economics, and whatever the monetarists may say it is still the best practice of modern political economy when recessions occur.
More on Osborne's plans 8:27pm on 08 Oct 2009 Ishkandar. The creditors are the world's financial markets. There is no shortage of demand for government debt because:

a)The British Government doesn't default on it's loans; it never has and it is seen as the safest form of investment for that reason. No matter how stupid a mess any govt may get us into we have a perfect record on this score. The Tory scares about losing bond rating were just that - scares. I don't think they believed it themselves, they were using it to highlight the story. No credible source agreed with that assertion (although some journalists did which is an indictment of the way media can be relied on to make stories out of non-stories)

b)In a recession govt debt in the form of bonds tends to rise in value as investors look for a safe haven. We have secured a lot of funding capacity but now investors are recovering confidence and moving back into equities.

There is no danger that creditors will demand debt back, that is just a silly scare story employed by our city friends. Any academic economist will tell you this, but most of our economic coverage comes from the financial markets these days as economists are loathe to make predictions given their appalling track record, and hence hold little media attention, the city however has no such qualms.

You also suggest that the empire gave us huge wealth. In fact the empire was a huge drag on funds, we had to maintain embassies, consulates, standing armies to keep order and a whole lot more, and it was our dire financial strait after the second world war which gave such momentum to all the independent states created shortly afterwards.

Nowadays Britain is a much larger economy and actually has many more assets, hard as it may be to believe. But the point is this. As a nominal figure the debt is a record one. But in proportion to our assets it is actually not that large, certainly not by historic standards. The best analogy is if you assume our country is a house, it now has a much larger mortgage than before, say £1 trillion for argument's sake. However, it is now worth £6 trillion. Our annual income is in the region of £200 billion say, and our expenses are £222 billion or an 11% deficit. The cost of financing our debt (included in our expenses figure) is probably around £30 billion.

If we don't address the situation then our debt will continue to grow, and we will see the deficit very slowly rise. But the interest rate is very low, only a couple of percent and it is long term, so we don't have to pay any back yet. And when it comes to the time that we do we could simply refinance and issue more government bonds. However, while the debt is not that variable our tax income and expenditure is. While we are running a large 11% deficit at the moment, a lot of that is due to the countercyclical nature of our system - i.e. higher benefits payments as people are out of work, lower taxes for the same reason, special funds to bail out banks etc. There will be a substantial swing in our fortunes as the economy turns around because our payments are designed to rise in a recession and fall in a recovery. But they do lag the recession itself as unemployment is a lagging variable, it changes after the event.

All the Parties are talking about cutting expenditure and raising taxes, and the Tories want to do it now. This is needless and potentially damaging. To their credit Labour have said they will wait but even they are moving the schedule forward and giving in to the doom mongering arguments. The simple fact is we don't have to pay yet, so we shouldn't We should not give in to the pressure from the financial markets who want the yield to rise on these bonds as the government repays early. And we should wait for tax revenue to recover to see how much we actually need to pay, because there is a chance that the economy will fair better than people are predicting, and all the cuts will be needless pain. If we behave as the markets want we will reassure those few who genuinely believe there is some doubt as to the resolve of the government to tackle the problem of growing national debt. Some argue that will restore confidence. But the real way to restore confidence is to restore growth, and that means spending money to stimulate new investment.

If we give money towards these schemes we will reinforce the markets faith in government funds. But it doesn't need reassuring, because our finances are solid. And the cost of doing so will be to harm the less well protected areas of our economy. In doing so we will satisfy large creditor organisations at the expense of the day to day businesses that rely on higher govt spending, and at the expense of consumers and businesses that need consumer spending as we reduce the purchasing power of the public sector. Keynes said that an uncertain future causes people to hold on to money that they would otherwise spend in a confident economy. His liquidity theory has been perfectly demonstrated in this crisis. Banks stopped lending to each other because they were no longer sure that people would be able to pay them back. This had a knock on effect. If the government responds in a similar vein and cuts spending or reduces the purchasing power of others then short-term business will suffer. And that will cause people to lose confidence in the short-term future. We would put our recovery at risk.

If we wait for a genuine recovery then we can recoup the money when it will dent confidence less, e.g. when markets feel that consumer spending is strong. The stock market has risen a lot recently and in the financial markets there is a growing feeling that economic recovery is well under way. But stock markets are leading indicators, they are ahead of real businesses in the recovery and don't have an accurate picture of the current situation. When they put pressure on the govt to sure up its position they do so without perfect information, and in so doing threaten to undermine the fragile recovery seen so far. We should wait. It is not imperative to satisfy the demands of the debt-averse conservative financiers when they are being unreasonably pessimistic about govt finances. The markets overreacted one way, now they have gone the other way. In the long term our finances are in no trouble, and we should not jeopardise long-term public sector projects to satisfy short-term sentiment-driven market opinion. They lent us the money, they were willing to lend at the returns offered then. They want it back to take advantage of cheap assets in the marketplace, but we need to protect our public sector projects instead of feeding the markets whims.
More on Osborne's plans 5:51pm on 08 Oct 2009 Obviously I wouldn't want to argue with all the moralising and criticising going on here, but I'd just like to point out that after the Second World War Britain had a national debt of over 400% of GDP. At no point were we threatened by the prospect of not being able to borrow, and it was only after the war, when the american's called in the loan, that Britain had to seriously consider it's position.

Debt is a problem, but it is not an immediate one. The idea that we need to act now with a deficit of 40-60% rising to 80-100% of GDP under conservative predicitions from the national statistics office is completely absurd. Have we forgotten the success of the conservative govt in bringing about an end to all this austerity after Atlee's rationing, and how by encouraging free-spending Britain grew out of her obligations? A national debt of this magnitude is not all that large by international standards. What is more, panicking and cutting spending and raising taxes will put a lot of pressure on a weak recovery.

If we are not careful we could see a return to the stagnation of the interwar years when spending cuts led to very sluggish growth in Western Europe. Keynes warned us, we should really know better by now than to trust in the self-correcting market mechanism. I don't want cuts in national spending now. We need to wait. We can pay off the debt when the economy is booming again, not while unemployment is still rising. The Bullingdon Club might not suffer all that much if general taxation rises but ordinary people will. I don't buy into all this false bravado from the politicians. They want to look as if they are taking tough choices. They are not. They are taking weak choices, they are bowing to the will of the city and the firms that want to see high yields on government debt amongst other things. The ratings firms say Britain needs to improve it's balance sheet to maintain its AAA rating. These are those same ratings firms that labelled mortgage securities as AAA. They were happy to do it then when they were bullish. Now they are overreacting the other way.

The money we pay back now will go towards improving balance sheets and increasing city pay packets and bonuses, it will go to shoring up company finances and maintaining profit margins, but it won't help the rest of the economy. The financial markets, the politicians, the multinational firms, the rich mogul-owned newspapers; all of them are in lock-step over this.

Why? Because this is a false economy. It will bring hardship on us to repay the mistakes made by the rich executives. They want to maintain the profits from boom time in a recession. They fired their workers, they lose staff at a drop of the hat, yet they pay themselves the same over-inflated salaries. Yet they want us to bear the brunt of the cost. We shouldn't tolerate it. They should have to make sacrifices too, i.e. corporate profitablity should fall, staff should be kept on. We should hold onto those bank shares until the market is booming again, not sell them at the first opportunity. Life is returning to the corporate world. They want the government to sell off all it's assets to the private sector so they can ride the recovery while taxpayers pay off the debts left behind. We should say no. Not yet. We'll pay back our debt when we can best afford to, until then we will simply meet the interest payments, no more. Our city compatriots aren't stupid, we shouldn't be either. When they needed help they got money, they got time. They should afford the public sector the same luxury.
Is economics a busted flush? 5:13pm on 17 Jul 2009 This is not a failure of Economics as a whole, it is a failure of Neo-Classical Economics, which is one particular school. The fact that it is so dominant is a reflection of the all too strident US-led opinion that the market will always know best. It won't, and even the most competitive of markets are full of inefficiencies. This is not to say that other systems than market-based economies are better. That is not normally true. But we have to weigh up each market and assess it for its particular criteria, something which the very misunderstood Keynes was keen to emphasise.

Macroeconomic changes are very hard to predict, and modelling based on rational expectations - the dominant model in our Western financial markets - assumes that our predictions will be mostly accurate. Many economists (including Keynes) have predicted that the herd-like nature of market behaviour is not rational but based on instinct, and that market prices and behaviour will be driven by short-term expectations weighted too highly versus long-run prospects. In other words our bankers and commodity traders are too interested in making the next trade and how much their products will be worth in the immediate future and base their decisions accordingly - they do not take the longer term value into account.

When looking at our banks failure the media have failed to adequately point out that many of our financial failings are due to mortgage bond prices collapsing to unusually low prices that do not reflect the likely return from buying and holding these bonds. The banks' need to remove these assets from their balance sheets drove the prices far too low, and banks got into trouble because of short term lending obligations and not because all these mortgages were worthless. When the price recovers in the future the holders of these bonds are sitting on a gold-mine, and the price could well sky-rocket once again. Markets are not based solely on fundementals, and building financial institutions on the assumption that they are is unbelieveably short-sighted. This crisis is nothing new either, it is just a repetition of all the other bubbles we have seen, just this time the fact that the mortgage bonds were so widely traded and had a percieved minimum value meant that a much greater portion were bought and sold, and a bigger crisis ensued.
Map of the Week: Recession cuts crime? 7:43pm on 16 Jul 2009 Five comments, five people moaning about the stats. I'll wager they wouldn't have been moaning had the stats shown a rise in crime because then of course the stats would have to be perfectly accurate and reflect a failing justice system or government or whoever the poster wishes to criticise. Whether the stats are a good or a bad indicator of actual crime levels, by this measure crime has fallen. You can't jump on the evidence when the rate goes up and then rubbish it when it goes down. It might sell newspapers and allow people to be indignant with rage but it simply isn't true that the moral fibre of our country is in irreperable decay. I'm sorry folks, but whatever your agenda, this is GOOD news. Funnily enough all our kids haven't turned into knife-wielding maniacs void of humanity and compassion. Find something else to satisfy your urges and vehemently complain about. Stop believing the gutter press.
Anger Night! 10:33am on 27 Mar 2009 What makes me angry is all the mis-directed anger. We should be upset about the economic crisis, about the poor performance of the banks, about the light-touch regulation/Conservative+New Labour financial deregulation which allowed our bankers to seperate their remuneration from their performance, and about the lack of action from the FSA. I cannot believe that the FSA could be so unbelieveably naiive as to buy into the free-market neo-classical model which rests on such absurd assumptions as perfect foresight, perfect information and perfect, instantaneous adjustment of prices.

What we must NOT be angry about is taking measures to reinflate the world economy. All the bleating over the cost of borrowing is ridiculously misguided and the Conservatives are doing their best to stir up this sentiment. The Great Depression was exacerbated by Hoover's financial cutbacks and the withdrawal of funds back into struggling banks, and if we have not heeded the lessons learned from this catastrophic slump then we deserve to dive headlong into a recession. We need financial stimulus to protect our jobs and our spending power and let our markets recover; if we cut back now while demand is falling we will only feed the vicious circle of lower expectations -> lower expenditure -> lower employment.

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